The most common request we get is to write a business plan for a Bank loan. To better service this market we conducted research on what the major banks sought in a business loan application and developed a product to cater to their needs. Since then we have completed close to 1,000 of these plans.
- Director’s Profile
- Business Profile
- Business Case
- Cash Flow
We have provided an overview of what to cover in each of these areas.
This section is very important to the banks. The banks need to know who is going to be responsible for the business and the funds they supply. In the plans we do we generally do between three-quarters of a page to a page in a section titled Director’s Profile.
The main aspects to cover in this section are:
- Business / Management Experience
- Industry Experience, and depending on the business,
- Education and other formal qualifications
The objective of this section is to show the bank that the people in charge of the business have the appropriate skill sets and experience to run the business successfully.
In the situation where the directors are lacking experience it is advisable to have a manager or management team that has the required experience. We discuss this in the Human Resources section.
Provide a good explanation of what the business will do and why you believe the business will succeed. This gives you the opportunity for you to showcase your knowledge of the industry or market. It covers the unique selling point of the business and demonstrates the opportunity in the market you are targeting.
The Business Case
The banks have their lending criteria that they must abide by. To help them make an assessment on your case it is recommended to include the following:
- The total set–up cost for the business
- How much you are asking for (loan amount)
- How much you are contributing yourself
- Use of funds
Banks, and investors, want to know that you have some ‘hurt money’ or ‘skin in the game’. They don’t like businesses where they fund all of the costs of establishing the business.
It is also advisable to itemise what the funds will be used for. There may be alternative ways to fund the business.
Banks base their decision on the director’s personal financial situation and the business plan.
You’ll be hard pressed to find a bank that will go completely unsecured for a loan. Banks will consider a partially secured loan so list what assets you can offer as security. The most common is the property. Include the market value, mortgage amount and the institution, and your equity.
The level of the unsecured portion may well depend on how good the business plan is.
The banks want to see a month x month 1 year cash flow forecast. The cash flow should reflect what you have spoken about in the business plan. For example, if you say in the business plan that you will embark on a national TV adverting campaign then you should have more than $500 a month marketing budget in the cash flow.
It must be remembered that the purpose of the business plan is to show the intentions of the directors / management teams of how they will manage and grow the business. Therefore the business plan should include also include a marketing, operations and human resource section.